February 17, 2017

The Past, Present and Future of Energy Conservation in Ontario

By: Peter Love (Speaker at the upcoming Ontario Climate Symposium in May 2017)

THE PAST

In 1973, the federal Department of Energy, Mines and Resources (now Natural Resources Canada) created the Canadian Office of Energy Conservation that has offered various information and incentive programs since then, operating more recently as the Office of Energy Efficiency. Also that year, the Science Council of Canada called on all Canadians to begin the transition to a “conserver society”. In Ontario, the Ministry of Energy began developing policies and programs in 1975. In 1982, Ontario Hydro set a target of 1,000 MW of load shifting and 1,000 MW of conservation. In 1989 it included a budget of $3 billion in conservation programs as part of its Demand/Supply Plan that was subsequently withdrawn. During this process, it began offering demand-side management programs that were able to reduce electricity consumption by 2,500 MW before it was discontinued in 1993.

By 1990, the Ontario Energy Efficiency Act provided the province the ability to require minimum energy performance standards (MEPS) on the sale of specified energy consuming products. In 1992, the federal Energy Efficiency Act provided the federal government the ability to require MEPS on products traded across provincial or international boundaries. To date, about 80 products in Ontario have MEPS; updated requirements introduced in 2013 were estimated to result in savings of about 2 TWh by 2030.

The Ontario Energy Board established the original regulatory framework that governed demand-side management programs by the two natural gas utilities in Ontario in 1993. Using California’s example, the conservation programs were required to meet a cost effectiveness test called the Total Resource Cost Test. To date, savings from these programs are estimated to be more than 1,000 M m³ from 2007 to 2012.

In 2004, the Ontario government granted electricity distributors an increase in their rates by $163 million by way of the third installment of their incremental market adjusted revenue requirement (MARR) provided they invested an equivalent amount in CDM funding. Most Local Distribution Company’s (LDCs) in Ontario then launched a range of conservation programs, which were estimated to have reduced peak demand by 357 MW. Also in 2004, the Electricity Conservation and Supply Task Force issued its report, which called for the creation of a “conservation culture”.

The Conservation Bureau was established within the Ontario Power Authority in 2005; over the next ten years, they launched a broad range of conservation programs delivered by LDCs as well as various associations and private companies. These programs were funded by all electricity ratepayers with approval provided by ministerial directives.  Its initial target of 1,350 MW by 2007 was achieved and total savings to 2013 are estimated to be 1,900 MW and 8.6 TWh.

THE PRESENT

Following consultations, the Ontario government released its Long-Term Energy Plan, “Achieving Balance”, in 2013. Although called an energy plan, it is almost entirely an electricity plan, with no mention of conservation of natural gas or oil. It noted that conservation will be the first resource to be considered for electricity planning and set a target of 30 TWh by 2032 (16% reduction in forecast gross demand) with 7 TWh by 2020 and 2,500 MW of demand response. It also released “Conservation First: A Renewed Vision for Energy Conservation in Ontario” which, like the Long-Term Energy Plan, made no mention of natural gas or oil conservation. It did however make clear the government’s commitment to conservation first and that the LDCs would have an expanded role with more autonomy and programming choice.

In late 2014, the Ontario Energy Board issued CDM Guidelines for electricity distributors and DSM Guidelines for natural gas distributors. While the electricity guidelines focused on achieving the government’s target of 7 TWh by 2020, the natural gas guidelines had no such target. One of the most important features of the natural gas guideline is that it recommended DSM budgets increase from $65 million to $155 million/year.

THE FUTURE

Although it is clear from the previous two sections that much has been achieved, much more remains to be done.  Here are some of the most important developments needed for the full potential for conservation to be realized.

• Culture of Conservation – As noted earlier, the need for a move to a conserver society was first identified in 1973 and a culture of conservation was first promoted in 2004. In 2011, the Canadian Council of Chief Executives (composed of 150 CEOs of largest enterprises in Canada) called for the building of a culture of energy conservation in Canada. While limited progress has been made, much remains to be done before saving energy comes as natural to Canadians as dressing warmly in the winter. All mandatory as well as voluntary programs should all be framed in such a way that they are seen as being part of a move to this new culture.

• Customer/Tennant Engagement – One of the principal vehicles for bringing about a new culture of conservation is the direct engagement of energy customers and tenants in voluntary energy conservation programs. Important progress has been made here by a number of leaders but there is vast scope for progressive programs.

• Supply Subsidies – While conservation is already cost effective (in Ontario, every $1 invested in energy efficiency avoided $2 in costs to the electricity system), it would be an even more valuable if traditional energy supplies were not subsidized. One estimate puts this subsidy at $1.5 billion in direct support and $30 billion in uncollected tax on externalized costs such as carbon emissions.

• Smart Energy Network – As the electricity grid and other energy networks get smarter, conservation should play a larger role. Future smart appliances will know when energy prices are lower and shift demand automatically. The waste heat energy from some appliances (refrigerators, dishwashers, etc.) will be used to preheat water for others. In addition to this, ratio between on peak and off peak electricity rates will be increased to further promote demand response.

• Integration of Electricity/Natural Gas Conservation Programs –Energy consumers do not want to hear about one type of program offered by electricity utilities and a different one offered by gas utilities.

• Building Labelling – While great progress has been made in encouraging builders of both new homes and commercial buildings to voluntarily certify their buildings to higher standards (e.g., ENERGY STAR® and LEED, respectively), much less progress has been made on existing buildings.  And these buildings will continue to make up the majority of our building stock. Initiatives are underway at both the local and provincial level to require reporting on building performance which will drive energy efficiency retrofits.

• Evaluation, Measurement and Verification – Ontario has become a leader in the development and implementation of these programs but needs to ensure it maintains this leadership.

• Codes and Standards – Easily forgotten, mandatory minimum energy efficiency codes and standards continue to play a critical role in reducing energy demand. Energy planners love this approach as they are reliable.

• Transportation – It is critical that major initiatives be undertaken in transportation, which is responsible for 34% of energy consumption in Ontario.

* This blog is based on a recent article that I authored in Energy Regulation Quarterly on the 10^th anniversary of my appointment as Ontario’s Chief  Energy Conservation Officer.  The full article is quite detailed, as the readers of this publication are energy regulators, energy industry, as well as other energy experts. The article summarizes the key components of Ontario’s past and present activities in energy conservation. It then uses this background to identify some of the likely key elements and drivers of future activities.